CARICOM’s New Commitment To Tourism

By David Jessop
January 20, 2008

Last week in Nassau, I had the opportunity to listen to an address by Bahamian Prime Minister Hubert Ingraham, who recently assumed the role of Chairman of Caricom.

He was opening ‘Caribbean Marketplace’, the Caribbean Hotel Association’s (CHA) annual commercial gathering. Later the same evening, I heard a much broader and domestic version of his thinking when he addressed the Bahamian people on television.
In both cases and unlike some of his regional counterparts, Mr. Ingraham had much that was serious to say about the challenges facing the tourism sector in the region and in The Bahamas.

He identified near-to-static growth in arrivals; the increasing cost of energy; the challenge of climate change; the increased costs of airlift; and, the need to address the competitive imbalance between cruise and land-based tourism. He pointed also to the changing nature of the industry and its evolution from traditional European plan hotels (accommodation only) to mixed-use resorts and the rapid expansion of vacation ownership products that are appearing in formats that include timeshare, vacation-ownership plans, condo-hotel residences and fractional ownership.

“All these developments,” he said, “have economic, social and environmental policy implications for Caribbean Governments.”
Importantly, he noted that it was his intention, in his new regional role, that tourism should be raised as he put it, to a higher level. “When Caricom meets in March, tourism will be on the agenda,” he said to the CARICOM heads of government.
No one should be under any illusion that Caribbean tourism as an economic sector is potentially in trouble. So much so that there is a real possibility that if key issues are not addressed politically at the highest level, its loss of competitiveness could significantly set back the regional economic agenda.

Statistics show that in the first six months of 2007, average Caribbean tourism industry growth was just 0.1 per cent, when compared with the same period in 2006.

This contrasted unfavourably with the industry’s average global growth during that time of seven per cent. The figures also show many Cariforum nations – the 0.1 per cent figure reflects performance in the wider Caribbean – experiencing a significant decline in international- visitor arrivals and a dramatic fall-off in inter-regional travel.
To the casual observer, these problems in tourism may be surprising but beneath the image and the industry’s public desire to be seen as a success, troubling and perhaps structural, changes are taking place.

According to CHA Director General Alec Sanguinetti, fierce global competition from traditional and emerging markets means there is now the very real potential for Caribbean tourism to become marginalised.

“The price of oil, geo-political events and natural disasters are beyond the region’s control.”

However, he says, “Caribbean air services, human resource develop-ment, competitive service, the ongoing increase in taxes on the industry and environmental sustainability are, he argues, completely within its control. They urgently demand the Caribbean public and private sectors to come together in a determined effort to increase global competitiveness.”
Sanguinetti’s comments point to an issue not widely understood, even within the industry itself: tourism competition has become global. It is no longer primarily with neighbouring islands, but with destinations as far away as Bali, New Zealand and China. There, the quality of the properties, their levels of service and cuisine, lower levels of taxation and a wide choice of carriers with consequently lower air fares, offer visitors much better value for money, and often, a better experience.

Unfortunately, enhancing com-petitiveness in tourism is subject to other politically difficult pressures.
For instance, one new threat may result from trade liberalisation which could increase the fiscal burden on hotels and airlines and by extension every visitor to the region. The recently initialled economic partnership agreement with Europe and similar arrangements to be entered into with Canada, Mercosur and perhaps the U.S., imply that government revenues from import duties will fall over the next 15 years.
This will leave Finance Ministers looking for politically low-cost revenue-raising options to fund areas such as social services. The most likely target will be ‘foreigners’ in the form of tourists, in the mistaken belief that they will continue to want to visit, irrespective of cost.

This danger could be further compounded if governments continue to discriminate fiscally in favour of cruise ships over land-based tourism.

Internationally accepted satellite-accounting models now con-clusively demonstrate the huge penumbra of activity that land-based tourism creates.

Despite this, most governments remain stubbornly blind to the broader economic value of ensuring greater equity between the fiscal treatment afforded to floating hotels and the land-based facilities that support so many aspects of the national economy.

Logically, a medium-term solution would be to encourage the industry’s land-based product to move up-market so as to attract higher-yield visitors. However, many Caribbean properties, because of competitive pricing, low profitability and bankers’ aversion to the tourism sector, simply do not have the where-withal to upgrade.

As a consequence, the most significant new trend is for properties to be converted to condominiums or time shares that do not have the same cost constraints associated with the high levels of employment, maintenance and the taxation associated with full-service hotels.
This is, as one Bahamian hotelier eloquently puts it, “an exit strategy for the soul of Caribbean tourism”.
What all of this suggests, according to Vincent Vanderpool Wallace, the director general of the Caribbean Tourism Organisation, is that tourism needs to be seen as a vital sector of the regional economy and not just as an industry.
Encouraging competitiveness, he says, allows us to express tourism in economic terms and move away from the narrow measures of head count and visitor spending. It forces the establishment of tourism satellite accounts, which are much more comprehensive in the analysis of the value of the sector to the overall economy.

He also suggests that the time has come to pass the torch from older industries to tourism and thus elevate the status of the industry throughout the region.

He believes that there can be little progress without this. “We will not attract the best and brightest of our citizens to the sector, we will not get the kind of embrace from prime ministers that the sector needs and, most importantly, we will not get ordinary citizens to embrace the sector, which is a prerequisite to political support,” he says.

The fundamentals of tourism are changing. A policy-level debate about how best to guarantee a future for the industry is long overdue.

David Jessop is director of the Caribbean Council. Email: [email protected]